Bankers Pledge Cooperation With Obama

ERIC DASH

Saturday

Mar 28, 2009 at 5:16 AM

The chief executives of the nation’s largest banks told President Obama on Friday that they were committed to helping spur an economic recovery.

WASHINGTON — In a bit of political stagecraft designed to quiet the public’s anger toward Wall Street, President Obama summoned the heads of some of the nation’s largest financial institutions to the White House on Friday and urged them to accept responsibility for their industry’s excesses.

The 13 chief executives emerged from the 90-minute meeting pledging to cooperate with the administration’s efforts to shore up the banking industry and the broader economy. On a bright day with the cherry blossoms in bloom, administration officials and the bankers presented a unified message to the nation: We’re all in this together.

Indeed, the gathering was carefully choreographed by the White House, which had asked the banks on Thursday to provide broad, public endorsements of the administration’s financial recovery program, according to bank officials. And so, with the White House in the backdrop, one smiling executive after another offered his support for the president’s efforts in several television interviews coordinated by the administration.

“I’m of the feeling that we’re all in this together,” said Vikram S. Pandit, the chief executive of Citigroup, shortly after leaving the White House.

Robert Gibbs, the White House press secretary, used the same phrase to characterize the president’s message: “Everybody has to pitch in,” Mr. Gibbs said. “We’re all in this together.”

But behind the scenes, administration officials and the bankers spent considerable time addressing the more charged issue of executive pay. Both sides acknowledged the urgent need to defuse Americans’ anger with the industry, particularly if the White House is to gain more public support for its recovery program. The concern is that the anger, brought on in part by millions of dollars in bonuses paid by companies like the American International Group that have received government rescues, could threaten plans to stabilize the economy and the financial industry.

Sitting at the center of a round table in the state dining room, Mr. Obama spoke firmly about how there had been a “cultural shift” regarding executive bonuses and Wall Street pay. He said that Americans had a right to be angry. “The anger is real,” the president said, according to people who attended the meeting. “The industry needs to show that they get it on the compensation issue.”

“Excess is out of fashion,” Mr. Obama added, noting that pay must be linked to performance.

The bankers nodded, but made no firm commitments. Mr. Obama did not provide any assurances to the group, according to several executives in attendance, but urged them to “help me help you.”

Solidarity was also elusive on the administration’s plan to mend the financial system by purging banks of toxic assets. After the meeting, Mr. Pandit and other chief executives said that they were upbeat about the direction of the White House plan for private-public investments in the banks, but they made no commitment to using it.

During the meeting, the president called on the executives one by one, starting with Jamie Dimon of JPMorgan Chase, and asked them to offer their views on their banks and the broader industry. The topics included regulatory reform, mortgage refinancing, the “stress tests” that federal regulators are now applying to large banks, and the proposed program to buy their troubled assets. The executives emphasized that their banks were making loans, despite critics who say they are not.

At least two bank executives — Lloyd C. Blankfein of Goldman Sachs and Kenneth I. Chenault of American Express — asked the president to provide a pathway for them to pay back the taxpayer money that their companies have received. They stopped short of asking to do so immediately. Repaying the money with interest to the government, they and others argued, would send a positive signal about the health of the industry.

Mr. Obama acknowledged that repaying the money could be positive, but said that it needed to be done in a way that did not undermine lending.

Richard K. Davis, the chief executive of U.S. Bancorp, said that he told the president that he believed the industry recognized the outrage over excessive compensation and would work to change the dialogue.

“We all believe enough in our own importance, but we also believe that we are the single biggest catalyst for recovery,” Mr. Davis recalled telling the president.

Mr. Dimon also struck a conciliatory tone, acknowledging that the banking industry made mistakes with overzealous lending and lax standards.

During the meeting, Mr. Pandit of Citigroup stressed the need for consistent rules as the administration pursued its agenda.

Kenneth D. Lewis, Bank of America’s chief executive, and John Stumpf, the head of Wells Fargo, told the president that there were positive signs that the mortgage refinance business was improving.

And Robert P. Kelly, the head of Bank of New York Mellon, said he used the meeting to stress the need to modernize what he characterized as an antiquated regulatory system. “I suspect most of us felt that way,” he said.

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